OFAC Fines Indonesian Company for Violating North Korea Sanctions
An Indonesian paper product manufacturer settled for more than $1 million after apparent violations of U.S. sanctions against North Korea, the Office of Foreign Assets Control said Jan. 14. OFAC said PT Bukit Muria Jaya (BMJ) exported cigarette paper to North Korea and “directed payments” for those exports to its U.S. dollar bank account at a non-U.S. bank, causing U.S. banks to “clear wire transfers related to these shipments,” which included shipments to a sanctioned North Korean person.
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OFAC said BMJ exported the cigarette paper to entities located in or doing business on behalf of North Korea, including to a Chinese intermediary that procured the paper on behalf of U.S.-sanctioned Korea Daesong General Trading Corporation. BMJ initially listed the North Korean entities on its “transactional documents” but eventually replaced the names of those entities with the names of intermediaries in third countries “at the request of its customers.” This included replacing names on packing lists and bills of lading for the exports, which totaled about $960,000.
BMJ caused 28 wire transfers to clear through U.S. banks when it directed payments for the exports to its U.S. dollar bank account. OFAC said this constituted a violation of the North Korean Sanctions Regulations because BMJ caused U.S. banks to deal in the property of a Specially Designated National and “facilitate” blocked export transactions.”
Although BMJ did not voluntarily disclose the violations, OFAC said they constituted a non-egregious case. Mitigating factors included that BMJ had not received a penalty notice in the previous five years, cooperated with OFAC’s investigation, ended all dealings with North Korea and implemented a new sanctions compliance program. The program includes a new head of compliance, a third-party sanctions screening service, a formal written export control and sanctions policy, a “know-your-customer process” and a requirement that all companies or agents that buy goods on behalf of other end-users sign an “anti-diversion agreement” with OFAC compliance commitments.
Aggravating factors included BMJ’s “reckless disregard” for U.S. sanctions laws, management's “actual knowledge” that it was committing violations and the significant harm it caused U.S. foreign policy objectives. OFAC said it will credit all of BMJ’s $1.016 million fine once it completes its penalty payment “of a greater amount” owed to the Justice Department “arising from the same course of conduct.”
OFAC said companies should be aware that they might violate U.S. sanctions when their transactions with another country are processed through a U.S. bank. The agency said companies are at more of a risk of violating U.S. sanctions without a risk-based compliance program, especially when dealing with people or companies from North Korea, given the country’s “widespread efforts” to evade sanctions.